Europe's 'chilling' data reforms will deter a UK Facebook or Twitter

It will be difficult for the UK to be home to the next Twitter or Facebook, because of the "chilling" effects of Europe's proposed changes to data protection laws, claim industry representatives.

Industry trade bodies, including the Internet Advertising Bureau (IAB); Interactive Media in Retail Group (IMRG); Coalition for a Digital Economy (Coadec); the Federation of Small Businesses (FSB), and the Direct Marketing Association (DMA), have signed an open letter to ministers, warning them that the EC's proposals to clamp down on data violations would hamper growth of the digital industry in the UK.

It claims that the proposals risk "chilling the evolution of business models" and will put "significant burdens" on existing businesses, in the form of "unnecessary and burdensome red tape."

"We strongly believe the responsible use of data can bring significant benefits to consumers, to business, to government and the public sector, and to the UK economy as a whole, " they write.

They argue the "restrictive and prescriptive regime" for the use of this data being proposed, risks "denying small businesses and retailers the revenue they require to support, drive and develop their activities."

The letter cites a recent report from the Boston Consulting Group, which shows the UK is the world's leading "internet economy", with those businesses that engage in online marketing, sales and interactions standing to gain the most.

The letter, which is addressed to Ed Vaizey MP, minister for culture, communications and creative Industries, Lord McNally, minister of state, and Mark Prisk MP, minister for small business and enterprise, points to the prime minister's comments earlier this year, describing "small businesses and entrepreneurs" as "the lifeblood of the British economy"".

It also pointed out that the UK is a net exporter of ecommerce goods and services, exporting £2.80 for every £1 imported.

The letter said that the proposals would have "the opposite effect".

It said: "Many of the world’s greatest innovations come from lone entrepreneurs operating out of spare bedrooms and borrowed office space.

"They can only become commercial successes because of a policy and business environment that ensures low barriers to market entry, enables them to ‘scale up’, and allows them to challenge established businesses," they wrote.

Jeff Lynn, chairman, Coadec and one of the signatories of the letter, said separately the proposals will put UK entrepreneurs and startups at "a real competitive disadvantage" to US digital businesses.

"They are already struggling with the significant burden of the new regulations on Cookies, and it will be even more difficult for anybody to build the next Twitter or Facebook within Europe with these types of enforcements," he said.

Nick Stringer, director of regulatory affairs at the IAB, said that the EC's data protection reforms threaten the UK’s position as the world’s leading digital economy and will "throttle" the European Commission’s Digital Agenda.

The letter in full:

"The European Commission has published proposals to reform data protection law across Europe. We welcome the aims of the proposals: to update the law to make it more relevant to the digital world in which we now live and work; and to streamline the law to make it easier to do business across EU markets.

"These issues are not just important for the growing numbers of small and medium-sized businesses that are key to the growth of the UK's digital economy.

"In January this year, the prime minister described small businesses and entrepreneurs as 'the lifeblood of the British economy', helping support growth, employment and innovation.

"In September 2011, the Secretary of State for Business, Innovation and Skills also highlighted the crucial role of technology in that growth, saying that 'long-term investment in our economic strengths, and being at the forefront of technological development, are essential if we are to achieve sustainable and balanced growth'. We agree.

"Many of the world's greatest innovations come from lone entrepreneurs operating out of spare bedrooms and borrowed office space. They can only become commercial successes because of a policy and business environment that ensures low barriers to market entry, enables them to 'scale up', and allows them to challenge established businesses.

"The result has been good news for competition, good news for British business and good news for the consumer.

"According to a recent report for the Boston Consulting Group, the UK is the world's leading 'internet economy' with those businesses that engage in online marketing, sales and interactions standing to gain the most.

"We are also currently a net exporter of ecommerce goods and services, exporting £2.80 for every £1 imported.

"However, we believe the new proposals may have the opposite effect. We strongly believe the responsible use of data can bring significant benefits to consumers, to business, to government and the public sector, and to the UK economy as a whole.

"A more restrictive and prescriptive regime for the use of this data, as is being proposed, risks denying small businesses and retailers the revenue they require to support, drive and develop their activities.

"But – importantly - the proposals do not just risk chilling the evolution of business models. They would also place significant burdens on existing businesses, in the form of unnecessary and burdensome red tape.

"Rather than saving businesses money we believe that the proposals will make it more difficult to do business in the UK and across international borders.

"This is particularly at a time when many small digital businesses are already grappling with the implementation of the revised ePrivacy Directive.

"For example: a survey of British Businesses has shown that 87% will not be able to meet the EC's proposed rule on data breaches, and that 72% of businesses have said the rules would result in over-disclosure."